Enhancing Organizational Performance (1997) / Chapter Skim
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5: Interorganizational Relations
5: Interorganizational Relations
Pages 120-150
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From page 120... ...
118 ORGANIZATIONAL RESPONSES TO ENVIRONMENTAL CHANGE be needed for success in the 21st century. New forms of organization and increasing skill requirements for leaders are likely to make shared leadership increasingly important.
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From page 121... ...
DEVELOPING LEADERS 119 Preliminary evidence suggests that formal training, development on the job, and self-development are much more effective when coordinated with each other and supported by a strong learning culture in organizations. However, we have just begun to think about how to integrate these different elements.
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From page 122... ...
New roles for the military in the postcold war era, such as peacekeeping missions and disaster relief, have increased the importance of multinational operations and posed a significant challenge to the military's cooperation with local relief agencies such as the Red Cross and local government agencies (as the next chapter discusses)
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From page 123... ...
Second, there is greater competition for scarce resources today, so more and more are competing for less and less; sharing costs, risks, and scarce resources is making sense to many organizational leaders. Third, there is growing recognition that collaborative behavior, in contrast to competition and individualism, may often (but not always)
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From page 124... ...
An awareness of the world outside a particular organization has led researchers to realize that much of an organization's environment consists of other organizations. A focus on organizations and their environments stimulated research on how organizations sharing an environment as either competitors or potential allies are affected by their neighbors in organiza
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From page 125... ...
who mediate between themselves and their customers, the drug industry has been far more successful than recording companies in protecting their interests in patent protection, distribution, and pricing. Hirsch's study points to the superior collective efforts of drug companies in pursuing common interests, compared with the disorganized and misdirected efforts of recording companies that attempted to bribe disc jockeys in what became known as the payola scandals.
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From page 126... ...
Focusing on a geographic region, however, limits researchers' ability to assess the impact on performance of forces and organizations outside the region. Much of the recent interest in strategic alliances, joint ventures, and other forms of interorganizational relationships came about as an attempt to facilitate or manage network relations, increasingly possible since the Reagan administration's weaker enforcement of antitrust laws and the passage of legislation permitting some forms of research consortia.
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From page 127... ...
-- this principle does not exist in many other successful economies. Regime Analysis Another approach to analyzing interorganizational cooperation, international regimes, was developed from the need to understand cooperation in the less structured global system.
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From page 128... ...
They may use a series of "bridging strategies" (Scott, 1987:209) to lock in the supplies or support of another firm, including contracting, strategic alliances, and co-optation, the incorporation of important external agents into the firm, for example by forming interlocking boards of directors (Palmer, 1983; Mizruchi and Schwartz, 1986)
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From page 129... ...
To facilitate this transformation, however, partners must openly share information about strategic objectives, organizational resources, and internal challenges, which paradoxically increases vulnerability to acquisition, loss of market share, proprietary control of valued resources, and other sources of strategic advantage. Thus, collaboration can be seen as both promoting and threatening an organization's long-term stability and viability.
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From page 130... ...
These arrangements are strictly contracted and bounded in scope and duration. • Joint Ventures.
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From page 131... ...
Although interdependence is, of course, required for a joint venture to work effectively, the characteristic of interdependence is essentially the same as that required for any organization, whereas for a strategic alliance to work effectively, two distinct organizations must learn to cooperate and depend on each other. • Value Network Partnerships.
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From page 132... ...
130 ORGANIZATIONAL RESPONSES TO ENVIRONMENTAL CHANGE TABLE 5-1 Taxonomy of Cooperative Interorganizational Relationships Inter- Ownership/ Degree of Managed organizational Strategic Division of Interdependence Relationship Purpose Proceeds Least managed Market (competitive) Mutual Service Contracted pooling No shared Consortium, of resources for ownership/ Research & shared access to negotiated Development valued commodity: division of Partnerships market, technology, proceeds process Cross-Licensing Limited sharing of No shared and Distribution technology and ownership/ Arrangements markets negotiated distribution of proceeds Strategic Reciprocal Varying shared Alliance exploitation of ownership and resources for less managerial specified mutual control/negotiated gain distribution of proceeds between owners Joint Venture Reciprocal Varying shared exploitation of ownership and resources for managerial specific mutual control/ gain in presence of negotiated compatible distribution of strategic proceeds between objectives venture and owners
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From page 133... ...
, value added to leveraged by equality/ varying constituent perceptions of power, owners is inequality of shared power, high-stress compatibility of negotiated, investment/commitment and on boundary-role cultures, benchmarked, distribution/evolution of persons intergroup trust and monitored, revised bargaining power competition, (monitoring and resistance control systems to cooperation at needed) operational level Conflict between owners, Hybrid organization/ Perceptions of equity Venture between owners and venture culture buffers (need measurement performance, likely to develop as each cooperating partners, systems)
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From page 134... ...
In the private sector, relationships of this kind usually take the form of mutual service consortia or R&D partnerships.
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They are bounded in scope and often in time as well. Mutual service consortia and R&D partnerships can provide extremely valuable resources to their participants but demand very limited cooperation.
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Joint ventures involve the creation of a distinct organizational entity for managing the overlapping goals of the sponsoring organizations. Strategic alliances attempt to avoid potential conflicts by limiting the power of the (new)
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has identified five critical contingencies that affect different types of relationships, such as trade associations, joint ventures, and corporate-financial interlocks. The five are asymmetry, reciprocity, efficiency, stability, and legitimacy.
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From page 138... ...
Moving toward more managed interdependence, bargaining becomes even more salient. At the merger stage, the bargainers do their jobs and then "blend or integrate themselves out of role existence." Psychological Dynamics Findings from cognitive psychology contribute to our understanding of interorganizational relationships.
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From page 139... ...
In the public sector, it is far more likely that collaboration is mandated, as in the case of peacekeeping efforts between allies or the coordination of disaster relief efforts by state and local agencies. Private-sector firms sometimes find themselves forced to collaborate, however; for example, corporate headquarters in pursuit of a particular goal might mandate that a subsidiary collaborate with another subsidiary or with an outside organization.
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From page 140... ...
EVALUATION Assessment of relationship performance Reassessment of strategic importance of relationship Reassessment of bargaining power Decision to continue, control, renegotiate, or exit 5. EXIT Dissolution/divestiture of relationship or organization Acquisition of partner or venture FIGURE 5-1 Life cycle of cooperative interorganizational relationships.
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From page 141... ...
The first approach to evaluation assesses similarities of management and business philosophies, abilities to communicate, and interpersonal trust; the second approach is an assessment of the organizations' relative bargaining power in the relationship. Intangible factors, including each partner's perceptions of the other's reliability, trustworthiness, and culture, will exert an influence on initial bargaining positions.
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From page 142... ...
The relationship now consists of an exchange of resources across organizational boundaries; if the relationship is a joint venture, the owners work with the venture as an independent system rather than a theoretical entity. Even if a new formal organization has not been created, the reality of working across organizational boundaries at many functional levels is likely to be quite different from the experience of courtship and negotiation.
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From page 143... ...
Whenever possible, evaluation measures should be shared between collaborating organizations in order to reduce erroneous attributions regarding causes of successes and deficits in performance. Renegotiation, Control, or Exit If managers from each of the collaborating organizations are satisfied with the evaluation and decide that no response is necessary, the collabora
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From page 144... ...
If the relationship was not specifically bounded in this way, and partnership performance is unsatisfactory to a partner with sufficient bargaining power to terminate it, or if the environment has changed so radically that the collaboration is no longer relevant to the participants' strategic goals, the cooperative interorganizational relationship will end. In relationships between public organizations, success or failure in the accomplishment of mutual goals can have effects on the sponsoring organizations and their relationships (see Figure 5-1)
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From page 145... ...
In designing collaborations, then, managers should be well informed about a number of cultural variables that will impact relationship viability. Especially when more interdependent relationships are being considered, they should possess as much information as possible regarding their own organization's corporate and national/ethnic culture: which characteristics are relatively stable and which more ephemeral, how these characteristics might augment or impede achievement of strategic goals, and how members of other cultures view their own.
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From page 146... ...
Intergroup Relations Intergroup relations are typically examined and understood in the context of conflict and competition for scarce resources (e.g., Levine and Campbell, 1972; Alderfer, 1977; Rice, 1969)
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From page 147... ...
Stresses on Boundary Role Persons The paradox of vulnerability and maintaining a climate of trust, open communication, and information sharing while at the same time protecting the host organization's autonomy and security presents a challenge for executives charged with managing interorganizational relationships. Those performing in boundary positions are also responsible to both constituents in their host organizations and to their counterpart boundary managers in other organizations.
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From page 148... ...
Social psychologists who have studied intergroup competition, conflict, and collaboration point to the critical function of what has come to be called a superordinate goal -- a goal that neither partner could achieve separately but by joining together they can. It is also imperative that this goal or set of goals be measurable.
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From page 149... ...
UNANSWERED QUESTIONS If recent newspapers and magazine articles are indicative, the trend toward some form of interorganizational relationship will continue and probably even increase. More and more industries, especially the mature ones (e.g., chemicals, pharmaceutical, banks, etc.)
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From page 150... ...
These five areas for further study suggest rather clearly where the gaps are in the research literature so far, and consequently where more research is needed. Practice has outrun theory and research in this field, and there is a growing mountain of popular books and articles on strategic alliances, joint ventures, and the like.
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